If you really want to light the fuse of a liberal Democrat, compare Barack Obama's economic performance after 30 months in office with that of Ronald Reagan. It's not at all flattering for Mr. Obama.

The two presidents have a lot in common. Both inherited an American economy in collapse. And both applied daring, expensive remedies. Mr. Reagan passed the biggest tax cut ever, combined with an agenda of deregulation, monetary restraint and spending controls. Mr. Obama, of course, has given us a $1 trillion spending stimulus.

By the end of the summer of Reagan's third year in office, the economy was soaring. The GDP growth rate was 5% and racing toward 7%, even 8% growth. In 1983 and '84 output was growing so fast the biggest worry was that the economy would "overheat." In the summer of 2011 we have an economy limping along at barely 1% growth and by some indications headed toward a "double-dip" recession. By the end of Reagan's first term, it was Morning in America. Today there is gloomy talk of America in its twilight.

My purpose here is not more Reagan idolatry, but to point out an incontrovertible truth: One program for recovery worked, and the other hasn't.

The Reagan philosophy was to incentivize production—i.e., the "supply side" of the economy—by lowering restraints on business expansion and investment. This was done by slashing marginal income tax rates, eliminating regulatory high hurdles, and reining in inflation with a tighter monetary policy.

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Ronald Reagan talks taxes, 1981..The Keynesians in the early 1980s assured us that the Reagan expansion would not and could not happen. Rapid growth with new jobs and falling rates of inflation (to 4% in 1983 from 13% in 1980) is an impossibility in Keynesian textbooks. If you increase demand, prices go up. If you increase supply—as Reagan did—prices go down.

The Godfather of the neo-Keynesians, Paul Samuelson, was the lead critic of the supposed follies of Reaganomics. He wrote in a 1980 Newsweek column that to slay the inflation monster would take "five to ten years of austerity," with unemployment of 8% or 9% and real output of "barely 1 or 2 percent." Reaganomics was routinely ridiculed in the media, especially in the 1982 recession. That was the year MIT economist Lester Thurow famously said, "The engines of economic growth have shut down here and across the globe, and they are likely to stay that way for years to come."

The economy would soon take flight for more than 80 consecutive months. Then the Reagan critics declared what they once thought couldn't work was actually a textbook Keynesian expansion fueled by budget deficits of $200 billion a year, or about 4%-5% of GDP.

Robert Reich, now at the University of California, Berkeley, explained that "The recession of 1981-82 was so severe that the bounce back has been vigorous." Paul Krugman wrote in 2004 that the Reagan boom was really nothing special because: "You see, rapid growth is normal when an economy is bouncing back from a deep slump."

Mr. Krugman was, for once, at least partly right. How could Reagan not look good after four years of Jimmy Carter's economic malpractice?

Fast-forward to today. Mr. Obama is running deficits of $1.3 trillion, or 8%-9% of GDP. If the Reagan deficits powered the '80s expansion, the Obama deficits—twice as large—should have the U.S. sprinting at Olympic speed.

The left has now embraced a new theory to explain why the Obama spending hasn't worked. The answer is contained in the book "This Time Is Different," by economists Carmen Reinhart and Kenneth Rogoff. Published in 2009, the book examines centuries of recessions and depressions world-wide. The authors conclude that it takes nations much longer—six years or more—to recover from financial crises and the popping of asset bubbles than from typical recessions.

In any case, what Reagan inherited was arguably a more severe financial crisis than what was dropped in Mr. Obama's lap. You don't believe it? From 1967 to 1982 stocks lost two-thirds of their value relative to inflation, according to a new report from Laffer Associates. That mass liquidation of wealth was a first-rate financial calamity. And tell me that 20% mortgage interest rates, as we saw in the 1970s, aren't indicative of a monetary-policy meltdown.

There is something that is genuinely different this time. It isn't the nature of the crisis Mr. Obama inherited, but the nature of his policy prescriptions. Reagan applied tax cuts and other policies that, yes, took the deficit to unchartered peacetime highs.

But that borrowing financed a remarkable and prolonged economic expansion and a victory against the Evil Empire in the Cold War. What exactly have Mr. Obama's deficits gotten us?

I read this this morning and had to laugh, especially when it mentioned Paul Krugman. That guy has become a complete and utter joke. Last week, he said that we needed an alien invasion which would lead to a military buildup to jumpstart the economy. Then this week, he said via twitter that if the earthquake did more damage, it would be good due to more infrastructure spending. And some people still take this guy seriously?

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August 26th, 2011, 2:51 pm

regularjoe12

Off. Coordinator – Joe Lombardi

Joined: March 30th, 2006, 12:48 amPosts: 4180Location: Davison Mi

Re: Obamanonics vs. Reaganomics

slybri19 wrote:

I read this this morning and had to laugh, especially when it mentioned Paul Krugman. That guy has become a complete and utter joke. Last week, he said that we needed an alien invasion which would lead to a military buildup to jumpstart the economy. Then this week, he said via twitter that if the earthquake did more damage, it would be good due to more infrastructure spending. And some people still take this guy seriously?

well in all fairness nothing builds an economy like death and destruction. it's sick but it's true. Look at how germany went from third world country after WWI to global powerhouse.

3) The 1970s recession was fundamentally different from the depression we face today. It was caused primarily by the oil shock and the bankruptcy of the US government (Nixon's removal of the gold peg was a defacto bankruptcy).

I don't agree with Obama's economic policies, and I'm always in favor of a tax cut.

But, simply put, the Ronald Reagan economic recovery was largely a myth. The economy recovered because the oil started flowing again and Paul Volker had the balls to raise interest rates. The government actually expanded under Reagan and there was basically no deregulation.

The problems we face are more fundamental and deep. Some economic policies would probably accelerate the process more-so than others, but no matter what the case is, we probably are not going to recover until 2020 at the earliest.

EDIT:

As to what I mean by our problems being more fundamental and deep, I invite everyone to read Harry S Dent's work. I don't agree with everything he says (far too simplistic IMO) but he makes a fair number of points. Demographic trends are working against us. Our education system is failing to produce qualified workers. Our financial system is bloated and zombie in nature.

Blueskies, as to your first point, you are half right. Reagan didn't push much deregulation through the legislature. Instead, he rolled back many of the rules imposed by the regulatory agencies such as the EPA, FCC, FDA, SEC, etc. He used executive fiat to accomplish his goals. Conversely, Obama is currently using executive fiat to increase the roles and rules of those agencies, especially with the EPA.

I agree that taxes are currently near an all time low, but that's in spite of Obama, not because of him. If he had his way, taxes would increase, and there's no denying that fact.

All recessions are different, but I think even you would agree that we would have seen a stronger recovery this time around had Obama and the government simply gotten out of the way. Government does not create wealth and/or jobs, yet they keep trying, which creates the opposite result.

Reagan's economic recovery was not a myth. It actually happened. That's nothing more than a Keynesian talking point and I'm surprised that you repeated it. I can agree with you though that the raising of interest rates was probably the primary cause of the expansion, but it was not the only reason.

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August 29th, 2011, 11:03 am

theAlphaMale

Site Admin

Joined: August 6th, 2004, 1:25 amPosts: 4920Location: Hills of Auburn

Re: Obamanonics vs. Reaganomics

There is too much neocon cronyism on this board...you need a good libtard to argue with

Unfortunately the tools of rolling back taxes, deregulation, lowering interest rates are small adjustment tools that not done in moderation lead us down an ally. The entire sub prime mortgage situation was people making up was to make money off not just a bad investment but bundles of bad investments. But stimulating a house buying frenzy by lowering interest rates is finite...we are at rock bottom interest rates for home loans but most people cannot borrow or move their own home to move on. Businesses pay less than ever in taxes as well as wealthy individuals but they are not motivated or encouraged to hire more people because in squeezing down their workforces they have found they can still operate at a lower operating cost and increase their business at least incrementally by working their existing workforce more or more effeiciently. So a lack of jobs/growth and a poor housing market has killed the economy and it's basically at a stalemate. When interest rates were dramatically higher in the early 80's a adjustment downward would spark home buying because of the tremendous savings.

Taxes are at an all time low so there is not much work one could do there. Those adjustments were short term fixes and simply efforts that led to passing the buck later on. Is it a fact that there is an end to the financial might of the nation? That we cannot continue to live on percieved value?

I think the big issue is the lack of innovation..many of these companies have made money off of producing the same products that have not changed dramatically over the period of 30 years. Automobiles are finally trying to use some newer technology but they had to be embarassed into it...rather than the market forces driving with competition in that direction...it unfortunately took government intervention.

If you can blame a guy than fine...I think it's much more systemic and this article fails to recognize the importance of history and relys on chance and circumstance to paint a false portrait.

Obama proposed historic multi trillion dollar cuts that went ignored. Warren Buffet says that most of you republicans do not know what you are talking about that a business man will work to make money if there is money to be made via invest taxes or no taxes and that he should not be given the unfair tax breaks he is given. Bush spent exorbanent amounts of money and set us into 2 wars that we are still tied into and cannot escape. Not sure what anyone heres solution is to make it better...lower taxes more? lower interest rates? deregulation? It seems these things have been done and tried and we are still sinking. Wish I had more time.

_________________Regards, Alpha|Lionbacker.com \(^o^)/"I date this girl for two years and then the nagging starts: I wanna know your name..." - Mike Binder

August 29th, 2011, 1:27 pm

conversion02

RIP Killer

Joined: January 26th, 2005, 9:34 pmPosts: 10773Location: Sycamore, IL

Re: Obamanonics vs. Reaganomics

Alpha's alive!!!

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August 29th, 2011, 2:47 pm

theAlphaMale

Site Admin

Joined: August 6th, 2004, 1:25 amPosts: 4920Location: Hills of Auburn

Re: Obamanonics vs. Reaganomics

conversion02 wrote:

Alpha's alive!!!

Yes lol...and still full of it

_________________Regards, Alpha|Lionbacker.com \(^o^)/"I date this girl for two years and then the nagging starts: I wanna know your name..." - Mike Binder

August 29th, 2011, 3:21 pm

Blueskies

QB Coach

Joined: September 13th, 2007, 12:43 pmPosts: 3084

Re: Obamanonics vs. Reaganomics

The myth is that Reagan came in on a white horse, waved a magic wand of lower taxes and deregulation, and all was well in a couple years. There was much more to it than that.

The problems are, as Alpha said, systemic in nature.

We are walking a very similar road as Japan.

Deregulation would certainly help, but the economy is ultimately built on the backs of the individuals working. We could go institute the most free-market policies possible in say, Somolia, but it would still take them 50+ years to even approach respectable status.

Alpha, what neocons are you talking about? It certainly isn't me, because that couldn't be further from the truth. Then again, that term gets tossed around so loosely now that it has lost it's original meaning.

The rest of your post sounds like Huffington Post and DailyKos talking points, but that shouldn't surprise me. I hear the same rhetoric every day and have become immune to it. For the truth, talk to small business owners and they'll tell you that taxes and regulations are killing them. The problem is crony capitalism on both sides, where the government picks the winners and losers. The corporations get the tax breaks and loopholes, while small business pays a 35% tax rate because they make too much, but not enough to take advantage of those same loopholes. The small businesses are what drives our economy, so I'd lower the tax rates and eliminate the tax breaks/subsidies/loopholes to level the playing field. Allow the free market to determine the winners and losers, not the government.

Don't even get me started on sub prime mortgages. It all began when the government mandated that banks make loans to minorities and the poor, even though they couldn't pay them back. Add Fannie Mae and Freddie Mac into the mix, and you have a disaster waiting to happen. Since the banks had to offset their upcoming losses, they started using credit default swaps and other ridiculous schemes. Once they saw how much money could be made with these gimmicks, greed took over and it all spiralled out of control. The moral of the story is that good government intentions usually lead to unintended consequences.

"Taxes are at an all time low" is yet another talking point that some fools believe. Even Obama acknowledges that tax revenue in relation to GDP was lower under Truman in the 50's. Furthermore, the top tax rates were lower in 88 and 89 than they are now, and were even lower back in the 1910's and 1920's. This nonsense reminds me of the Nazi Propaganda Minister who said that if you repeat a lie enough, people will tend to believe it.

As for, "Obama proposed historic multi trillion dollar cuts that went ignored", wow, just wow. Name one "real" cut other than to defense, that he proposed. The majority of his plan involved tax increases now and cuts that wouldn't occur until years down the road. It was all smoke and mirrors without actually cutting anything in the near term.

Once Warren Buffett pays the back taxes he owes from his hedge fund company, he can start talking. Until then, he can STFU! Pure hypocrite.

I can not and will not defend Bush's spending policies. He was irresponsible, just like Obama is now. But, Obama promised in his campaign to reduce the decifit in half, only to almost triple it. By March of next year, Obama will add more to the deficit in 3 years and 2 months than Bush did in 8 years. This has got to stop and stop now.

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August 30th, 2011, 2:13 pm

Blueskies

QB Coach

Joined: September 13th, 2007, 12:43 pmPosts: 3084

Re: Obamanonics vs. Reaganomics

If you support fighting undeclared wars and foreign intervention, you are a neocon, at least somewhat.

That is opposed to a "paleocon" or old conservative that is basically what we would term a libertarian, but with more rightwing cultural values such as opposition to immigration, and possibly opposition to gay rights/abortion/etc.

There are very few paleocons left, as that string of ideology pretty much died out in the 1960s. The right wing is now dominated by neocons, libertarians, RINOS (moderate republicans) and what I would call neocon lites. Neocon lites being your Michele Bachmans and such.

Blueskies, you just reminded me of something that I had completely forgotten about. A year or so ago, I took a very detailed political quiz consisting of a couple hundred questions on a variety of subjects. When I submitted my answers, they labeled me as a paleo-conservative. So, we're not a dead breed just yet.

I should add that using your definition would make Obama a neocon too. Just saying.

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August 30th, 2011, 11:18 pm

Blueskies

QB Coach

Joined: September 13th, 2007, 12:43 pmPosts: 3084

Re: Obamanonics vs. Reaganomics

The Paleocons are mostly known for sticking up against FDR and Wilson. And they ran the country in the 1920s. Barry Goldwater was the last mainstream paleocon. Nixon was arguably the first neocon. Although I think GWB is the living embodiment of neoconservatism. And that rat bastard Cheney. I don't even believe in hell, but if there is one that's where he's going.

Obama is not a neocon because he's on the left side of the spectrum. A neocon is someone on the right wing who believes in (excessive) foreign intervention.

Obama is a leftist moderate. Or what I would like to call fascist. Although he lacks the balls to do things like invoke the 14th amendment to get around the debt ceiling.

Mostly because he simply doesn't need to. Virtually everyone in office is on the same side. The lets-take-a-shit on the constitution part of the spectrum.

I don't even know why I think about these things anymore. We're screwed.

August 30th, 2011, 11:37 pm

regularjoe12

Off. Coordinator – Joe Lombardi

Joined: March 30th, 2006, 12:48 amPosts: 4180Location: Davison Mi

Re: Obamanonics vs. Reaganomics

Blueskies wrote:

The Paleocons are mostly known for sticking up against FDR and Wilson. And they ran the country in the 1920s. Barry Goldwater was the last mainstream paleocon. Nixon was arguably the first neocon. Although I think GWB is the living embodiment of neoconservatism. And that rat bastard Cheney. I don't even believe in hell, but if there is one that's where he's going.

Obama is not a neocon because he's on the left side of the spectrum. A neocon is someone on the right wing who believes in (excessive) foreign intervention.

Obama is a leftist moderate. Or what I would like to call fascist. Although he lacks the balls to do things like invoke the 14th amendment to get around the debt ceiling.

Mostly because he simply doesn't need to. Virtually everyone in office is on the same side. The lets-take-a-shit on the constitution part of the spectrum.

I don't even know why I think about these things anymore. We're screwed.

The real question about Cheney and hell is this : Whos running hell while he is up here? If ever there was a "White Devil"...he'd be it.

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August 31st, 2011, 12:40 pm

theAlphaMale

Site Admin

Joined: August 6th, 2004, 1:25 amPosts: 4920Location: Hills of Auburn

Re: Obamanonics vs. Reaganomics

Hey Sly,

My Neocon comment was toungue in cheek...a response to labels such as "libtards" lol.

I don't think I've ever read the huffington post nor do I read or watch any other specificly liberal media.

My real belief is that any move you think is a great move on the conservative side or liberal side is a short term fix that cannot ever replace innovation. The lack of innovation is due to a big lack of competition because megaconglomerate companies can devour the hint of competition. It's why such businesses have the money to grease the wheels to make the small business owner bear the brunt and not the billion dollar corporations.

Is that a liberal viewpoint...no, its a reasonable viewpoint cause I am with the reasonable party...oh wait...there is no such thing lol

The fact is no one can point to a true cause effect relationship with the economy and say that tax breaks equal this and will do this or tax hikes will do this...it's all BS theory based on a short history of the modern economy supported by annecdotal evidence. Are interest rates luring people to buy homes right now? Hell no...but you cut them so much what would happen if you returned them to 8%...not a home would move. But you are now stuck with this interest rate that is in ways killing the economy even though it was supposed to serve as an incentive to boost it. It all cycles and is so dependent on situations that are ever changing that no one can proport to have the solution...left right or center.

So because of that it's the people that seem to insist the most that I doubt the most...the ones that are certain that I then know are full of it because it's basically unknowable.

The only contribution that trickle down economics has had is a higher investment in fresh socks. I guess I am tired of being trickled on.

_________________Regards, Alpha|Lionbacker.com \(^o^)/"I date this girl for two years and then the nagging starts: I wanna know your name..." - Mike Binder